If you do get that much, we’ll all be visiting you.
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Certainly a challenge. We’ve needed to rely on professional property valuers for a number of transactions with rural properties. It’s only ever a best estimate based on recent similar property sales in the area. Often there are none, which makes it more a best guess?
For the wider community, as @grahroll I’m assuming already knows how it works.
Rural land valuations in Queensland are based on the unimproved valuation of the lot. This excludes all improvements.
In the end a rural property is only worth what someone in the market is prepared to pay on the day. If there is little interest or competition it’s possible the buyer may score a bargain. Hence good reason for the sellers RE Agent to do their best to generate interest from more than the one buyer. A dreamer and tree changer will view a lot very differently to a developer. Or the guy over the road who measures local land sales on how many macadamia trees he can plant. The turf farm guy looks at how flat and deep the top soil is, assuming there is free water!
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NSW property so gets different treatment rates wise if Primary Production than if Residential or Industrial. However yes it is on unimproved Land Valuation. That’s one view from up top on the block (which some have already seen).
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The systemic market fairness problem is that the price negotiator/mediator is a partisan (for the seller) and specialises in that inherently bias-creating craft - marketing. Buying a home is the largest and most important purchase that most people make (the ~60% who can afford it). Why we accept these biased practices that help prop up one of the most unaffordable, ungrounded housing markets in the world beats me. You’d think that given the many detrimental effects this has had on society and the economy, policy makers and regulators would take more care over creating a fair market place that reflects property current use value rather than favouring speculative future value. In my opinion the property market has a lot in common with the way the infamous art market now works.
I agree. However as noted by others there are times when no-one is really sure of the market value for a property (for various reasons). In those cases there is an argument that EOI is needed. But it could only deliver a ‘fair’ market price gauge if it involved full transparency to all parties, including buyers, on price offers. That way everyone can see what the current market price is. The seller of course is at liberty to decide if/when they sell.
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Of course the agent for the vendor is partisan, they are legally obliged to be. That does not mean you or your representative cannot negotiate effectively too. If you engage an agent or solicitor to bargain for you they are expected to be partisan as well - in your favour.
Of course agents market the property the best way they know how, as does every other seller of goods and services.
I do not see that anything you have said is unfair. How would you undo this unfairness that you perceive?
There are many causes behind our inflated property prices, especially in the big cities. It is not so simple that there is but one reason for it.
How would you prevent people from speculating in the property market? Why is investing in property somehow unacceptable?
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One way is to require asking prices to be published. A prospective buyer could offer that amount, more, or less at discretion with their offer having a finite validity. The seller could hold out for a better offer or accept the asking price or less. That is how the US market largely operates. One difference is the US system uses the ‘multiple listing service’ whereby almost 100% of properties can be offered by any agent. The listing agent and selling agent split the commission. That ‘window’ into the market adds some power to buyers to see what is out there and the asking prices.
The main difference as compared to ‘our’ system of auctions and EOIs and ‘Sell by dates’ is that some of the layers of opaqueness are removed. A vendor can elect to sell quickly or sit on a property in anticipation of appreciation. They can do that here also but have been educated otherwise to create artificial pressure on buyers that predictably pushes prices up because of FOMO.
Two aspects both in government control. [capital gains] Taxation and [real estate] taxation including stamp duties that can be designed as levers to reduce the ‘opportunity’ or as it is, all but designed to encourage it.
The myriad reno and flipping shows on TV imply there are great profits to be made but the ‘reality stars’ are adding value not just flipping and speculating.
The concept of ‘Investing’ suggests more than just speculating to drive up prices, an arguable difference.
In the context of life the basics (ignoring sex) are food, water, shelter, and clothing. If it is acceptable for a society to speculate in one, why not all, and some would answer ‘why not?’ So pre cyclone speculators could buy the supply chains for food and water out, and if it hits quickly drive prices up by 1000% as just good business, right? Supply and demand, as with housing?
This touches on morality, amorality, economic systems and so on, but I have been wrong since the 1970’s thinking the rising real estate prices could not keep going up in the capitals vis a vis incomes, yet they have with few and usually minor pauses. With that I realise I am no expert.
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Assuming that the vendor/agent know what a fair price is in advance and the reason they withhold it is to manipulate the buyer. The market has to determine what the price is and under volatile circumstances it may be impossible to guess until the auction actually happens.
Maybe. But how? What is capital gains tax now and why does it not have the effect that you desire? Would you increase it only for property? Several jurisdictions (NSW of late) are talking about eliminating stamp duty, overseas many have done so. Their theory is that it is right to tax the capital of property through a land tax but not the transfer through stamp duty. Why are they wrong? Would you increase stamp duty?
Maybe but does terminology matter? If one is making any investment one looks out for several things; capital gain, a steady return and useful tax arrangements. Your example of jumping in to take take advantage of anticipated price rises is closer to my understanding of speculation. You can get all four of these benefits with (say) shares as well as property. Why is this OK with one but not the other?
If we want to constrain the booming capital city property markets I cannot see how any of the measures you mention will do the job.
Here are some ideas: increase the supply of property, abolish negative gearing and quit the political motivated first home buyers grants (and similar) that have the perverse consequence of pumping more money into the market and inflating it rather than deflating it.
That suggests that only an auction sets the fair value, not the FOMO ambit value. We can agree to disagree on the merits of property auctions. If all property prices are advertised it sets an expectation among buyers and sellers without the FOMO aspect.
You seem sceptical of taxes but then pose negative gearing and first buyer grants, both being tax strategies government uses.
Changing from speculating to investing can be cajoled by strategies such as reducing the CG taxes after say 5-10 years. Would the market normalise after that set in, and revert to the present? A fair question.
Increase the supply is a necessary strategy, but so is serious decentralisation that moderates ‘hot spots’ of demand. Decentralisation could be building up regional cities or extending the outskirts of metro area. (There are issues of infrastructure and transportation that cannot be ignored but all of it has mostly been ignored excepting by reaction rather than planning.)
Real Estate Agents selling properties have several needs.
Number one is obtaining listings - stock. IE convincing a prospective seller to use them as opposed to the agent next door. A not so great example of poor behaviour includes the letter box drops suggesting your property might be worth more than you think, call for a free appraisal and quote. There may be added puffery suggesting the market is hot and they have lots of buyers looking for properties like yours.
The law (state dependent) requires the RE Agent to act in the best interest of the seller. There are boundaries to what these best interests are. Even as a prospective seller, it is important to be well informed.
A second obvious need is RE Agents make their money out of sales. They may list or agree to market at a price above the market. In the end it serves no purpose to get an extra $50k on the asking price vs a quick sale. I’ll suggest that RE Agents are just as clever at managing most sellers expectations as they are at enticing prospective buyers. The exceptions are those sellers who have unreasonable expectations, or some of the properties which are substantially different from the typical sales in their area.
When we’ve needed to buy or sell, the greatest effort has gone into assessing the market. That involves research on line, and lots of open houses, plus the occasional auction. Any concerns about whether a property is listed with a price, price guide or not soon disappears. For those time poor, perhaps a buyers agent is the next best alternative, assuming you can reliable communicate what you need in the home, the price and location.
P.S.
The fair price of property and the nature of the Australian property market is another topic. One of false prophets, vested interests, and distorted markets. That the Australian economy and personal wealth is over-reliant on investment in property as well as for growth is an understatement. One solution to the housing crisis is negative population growth. One only needs to look to regional Australia and the value of housing in smaller regional towns. The average value of a house in Gundagai bears little relationship to with the change in value of a house in the eastern suburbs of Sydney or bayside Melbourne.
Whether Houses in Gundagai should be priced as for Sydney or Sydney Harbour side houses priced per Gundagai?
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I am being consistent in saying take away tax rules that apply to property but not other investments, that is treat the all the same. You are extending the current inconsistency in suggesting more or taxes should be added only to property, that is treat them more differently.
That I am. The concept of using taxes to implement public policy is really not different from exempting some things from GST.
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The Real Estate Industry preys on the unwary unsuspecting and uninformed Entrant to the Real Estate Game and Target Groups are Women and the Elderly and they carry more tricks than a Magician at a Party Buyer Beware and Seller equally beware
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In China they are dealing with their property inflation problem (due to rapid rise of the urban middle class) by restricting the number of properties they can invest in (I think it might be one). I don’t know how well it is working there but i understand it is having a noticeable impact on the housing market in Australia as these investors flock to buy property in overseas housing markets instead. Such is the aversion to investing in anything else.
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Yep. Because housing is a ‘necessary good’, since we all need shelter, it should be treated differently to other investments to the extent that those investment market regulations are unable to deliver adequate housing to everyone. Clearly by global comparison, the housing markets in Australia and New Zealand are failing outstandingly in delivering this outcome. And given there is no such thing as a truly ‘free’ market (all markets depend on government regulation, enforcement and social conditions to function effectively at all) it follows that the place to look for blame is the way the market conditions and regulations have been created. Australia and NZ are neither short of space or money, the main problem is how incentives have been configured over many decades.
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Well asked.
One of our sons considers buying real estate like picking an item from Kogan’s online catalogue. Why deal with an agent when all the information you require should be freely provided. I’ll have the one with the blue tiles. 
He has been to open houses, avoided the gaze of the agents, and wondered why the ‘pack shots’ (3D online walk through) are nothing like the product?
As much as this discussion of the listed or not listed price is important, there are many other steps that need to be completed before a number is committed to and the dream realised. Of course the RE Agent might prefer you do things in a different (reversed) order.
In NSW, it would appear that they are obliged to give a quote to the vendor, and if giving the quote as a range then the higher number may not be more than 10% above the lower number - and they have to have evidence to defend the quote as “reasonable”.
Honestly, in rural areas where the number of sales is lower and the comparability is lower, I don’t know how this works. Perhaps there are some exceptions.
The quote tells you not much about what the vendor will accept. Vendors quite reasonably want to get as much as possible. Vendors ultimately have to respect the market and that may mean reducing what they will accept. They either sell at what the market is prepared to pay (only known once the sales process completes) or they don’t sell (which is fine if they don’t need to sell).
Vendors may initially be reluctant to list at a price because they don’t want to limit the sell price.
Quite some years ago we were selling our house. We brought in a number of agents to look at the property, discuss what if anything should be done to it prior to sale, what it might sell for, what their fees and charges are, …
The highest sale estimate was fully 50% higher than the lowest sale estimate. Fortunately this was before the underquoting “reforms”. I don’t think any agent was intentionally being silly about it. Real estate just isn’t an exact science. (For the record, the highest sale estimate was closer to the mark, may even have been slightly under.)
Or in any case to get bigger crowds in order to create a buzz and to create FOMO.
I’ve seen enough real estate market craziness over the years to know that simple solutions to complex problems don’t usually work.
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I think we agree on some aspects of this, having just mentioned three actions that will help take off the pressure that are all in government hands.
increase the supply of property, abolish negative gearing and quit the political motivated first home buyers grants (and similar)
I wonder how they would go with this brand new, one owner, never occupied property?
Casino licence definitely not included.
Very funny (not really). I think that fine harbourside property would be an exempt commercial property. 
To the topic at hand, the NSW government specifically says:
If you and your agent agree, you can decide not to make any statement about the likely selling price and not publish any price estimates. If so, prospective buyers will need to rely on other means to help inform them about the value of your property in the current market.
So, in NSW at least, not listing prices appears to have been a foreseen “unintended” consequence.
With large penalties for underquoting and with the prospect of having to defend against the nebulous distinction between “underquoting” and “a hot property”, I can see why agents take the safe option, particularly in a rising market.
I still wonder whether allowing a property to sort at a price but without listing a price is an unforeseen (or forseeen) loophole.
